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Refinancing 101

  What is it? Mortgage refinancing generally refers to the process of taking out a new home mortgage loan and using some or all of the proceeds to pay off an existing mortgage (or mortgages) on the property. No-cash-out refinancing occurs when the amount of your new loan doesn't exceed your current mortgage debt (plus points and closing costs). With this type of refinancing, you may be able to borrow as much as 95 percent of your home's appraised value. A cash-out refinancing occurs when you borrow more than you owe on your existing mortgage, allowing you to use the excess cash in any way you see fit (e.g., remodeling project, pay off high-interest debt). In this case, you are generally limited to borrowing no more than 75 to 80 percent of the appraised value of your property.   Why refinance? You've heard about the record-low interest rates. Now you're wondering whether you should throw your hat into the ring and refinance.  Here are a few reasons why ...

What Refinancing Means to A Homeowner

Typically, when interest rates drop significantly, there’s a lot of ‘buzz’ about refinancing and lowering your monthly payment. If you’re new to homeownership or a homeowner that’s been in their current mortgage for some time, you may have some questions regarding refinancing and what it means. For starters, refinancing is simply the process of financing something again. Often, this is a new loan at a lower interest rate. The decision to refinance your mortgage should be carefully considered based on your short and long-term goals. What’s more, you should always consult a qualified Home Loan Advisor to discuss your options as well as any costs associated with refinancing your home. Why Would A Homeowner Refinance their Mortgage? Quite simply, a refinance is intended to save you money. The interest rate of your mortgage loan impacts your monthly payment, so a lower interest rate means a lower payment. Plus, it reduces the overall amount to finance your home over ...

Seven Ways to Boost Your Credit Score

For many, the summer is the best time of the year to buy a new home. Plus, rates are currently at a two-year low, so now is a great time to buy! First Bank Mortgage would like to remind clients of the importance of knowing their credit score before shopping for a new home. Whether you’re renting or buying, your credit score is significant. It is important for you to responsibly manage your debt levels and maintain good credit reports so that you are more attractive to mortgage lenders. First Bank Mortgage suggests the following tips to improve your credit score: Request a copy of your credit score report – and make sure it is correct. Your credit report illustrates your credit performance, and it needs to be accurate so that you can apply for other loans, such as a mortgage. Everyone is entitled to receive a free copy of his or her credit report annually from each of the three credit reporting agencies, but you must go through the Federal Trade Commission’s website at www.annualc ...

Five Important Questions When Choosing Your First Home

Moving into a new home can be exciting and frightening at the same time. The American Bankers Association suggests considering the following questions when choosing your own home. How much money do you have saved up? Start with an evaluation of your financial health. Figure out how much money you have for a down payment or deposit on a rental. Down payments are typically 5 to 20 percent of the price of the home. Security deposits on rentals are usually about one month of rent and more if you have a pet. But, be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs. How much debt do you have? Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt, and student loans. Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25 to 30 ...

Six Tips to Save for a Down Payment on a New Home

If you’re considering a new home purchase, the down payment you put upfront plays a major role in your future housing expenses. According to the Consumer Financial Protection Bureau, the amount you save can greatly influence your interest rate, monthly house payment, and your need for mortgage insurance. As you prepare for the home buying process, here are six tips to help you cut the extra costs and save a substantial amount for your down payment. Typically, lenders require anywhere between 5 and 20 percent of a home’s purchase value as down payment, but the more money you can put down, the better off you’ll be. By responsibly managing your spending and allocating extra cash to a savings account, you will be on the right track toward saving for your home purchase. First Bank Mortgage is providing prospective homebuyers with these tips to save for a down payment: Develop a budget and timeline. Start by determining how much you’ll need for a down payment. Create a budget and ...

Sale of Vacation Home: Tax Considerations

What are some tax considerations associated with selling a vacation home? If you sell your vacation home and wish to know the tax consequences, you must first determine whether your residence qualifies as a vacation home in the eyes of the IRS. Assuming that it does, you should know how to treat capital gains and losses. You should also know what to do about closing costs. What is the tax definition of a vacation home? The tax treatment of your additional residence depends on how often the residence is used for personal purposes relative to the amount of time it is used for rental purposes. From a tax perspective, rental properties with personal use by the owner generally fall into one of four categories: Personal residence--Typically, this is a residence that is not rented at all or is rented for fewer than 15 days during the year. If it is your primary place of abode, then it is your principal residence. Vacation home--This is a second residence with a combination of personal and rental use ...

Special Considerations for Building a Home

What is it? Maybe you've searched all over for the perfect home and can't find one that you like. Or perhaps you've always wanted a custom-built house that is suited to your individual tastes. Whatever the reason, you've decided to build a home and may have discovered that it is a bit more complicated than buying one that is already built. How to do it Choose a lot The process begins when you purchase a lot to build on. This may not be as easy as it sounds, though. There's a lot to consider. Location: What type of neighborhood do you want to live in? If you have young children, are there other young families around? If you like the peace and quiet of the country, is the lot in a rural area? Grade: Which way does the lot's surface slope and lie? Does the lot lie lower than those surrounding it? If so, there is a good chance you could have drainage problems as water runs off neighboring properties onto yours. Services: Is the lot hooked up to any municipal services? City or town lots ge ...

How Much Can You Afford?

Introduction An old rule of thumb said that you could afford to buy a house that cost between one and a half and two and a half times your annual salary. In reality, there's a lot more to take into consideration. You'll want to know not only how much of a mortgage you qualify for, but also how much you can afford to spend on a home. In order to know how much you can truly afford, you need to take an honest look at your lifestyle and your standard of living, as well as your income and what you choose to spend it on. Getting to the bottom line If you have unlimited resources, you can afford to buy whatever home your heart desires. For most of us, though, that's not the case. Unless you can afford to buy a house outright, you'll probably need to get a mortgage to help you pay for it. So, determining how much house you can afford is often a case of determining how much of a mortgage you can afford. Start with some simple math: Take your monthly income and subtract all of your non-ho ...

Homeownership

What is it? If you're like most consumers, homeownership involves the largest financial transaction you'll participate in during your lifetime. As such, it's no wonder that the process of buying or selling a home can be so stressful, frustrating, and, at times, totally confusing. If you want to ensure that you make sound financial decisions and survive the process with your sanity intact, you should first educate yourself about real estate transactions and then engage in careful planning. Your first step should be to ask yourself: "Do I really want to own a home?" Isn't it always smarter to buy rather than rent? Many people feel that renting is like throwing your money away, and that you should buy a house as soon as you can. However, this isn't necessarily true. Although there can be many benefits to homeownership, many people find renting more advantageous than buying. Which is better for you? To find out, you'll need to evaluate many nonfinancial and financial fac ...

Tax Benefits of Home Ownership

In tax lingo, your principal residence is the place where you legally reside. It's typically the place where you spend most of your time, but several other factors are also relevant in determining your principal residence. Many of the tax benefits associated with home ownership apply mainly to your principal residence-- different rules apply to second homes and investment properties. Here's what you need to know to make owning a home really pay off at tax time. Deducting mortgage interest One of the most important tax benefits that comes with owning a home is the fact that you may be able to deduct any mortgage interest that you pay. If you itemize deductions on Schedule A of your federal income tax return, you can generally deduct the interest that you pay on debt resulting from a loan used to buy, build, or improve your home, provided that the loan is secured by your home. In tax terms, this is referred to as "home acquisition debt." You're able to deduct home acquisition debt o ...

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Disclosure

All First Bank blog information and content is strictly informational. It is not intended to be specific investment, tax, or legal advice. If you need detailed financial, investment, or tax advice, please contact a First Bank qualified professional. Please note, First Bank occasionally shares third-party content we find to be relevant and helpful to our audiences.